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Thursday, January 31, 2008

Stephen Dubner over at Freakonomics seems to imply so - that Economists may be one of the few individuals able to analyze things objectively and free of bias. Now, perhaps I'm no expert, but I know enough economists and read enough news to know that that is ridiculous. I've said before that the arrogance of the economic profession is a big concern of mine, and here it again shows its head. Economists have their biases - they call them "assumptions."

It's time for the economic profession to stop pretending they are somehow immune to being human or somehow loftier than other fields of inquiry just because they know how to differentiate an equation.

Wednesday, January 30, 2008

Bernanke and friends did it again today and dropped the funds rate by another 50 basis point (on top of the 75 they did last week). As I mentioned last week, nothing happened - in fact the stock market fell last week in the days after the announcement for the most part both here and globally.

So what happened this time? Well, the Dow is, according to my stock checker on my phone, down 37 points on the day. The S&P is down 7 points. Yet again, this is a big slap in the face to the Fed bankers and to me it is quite scary actually because it shows me that this market really has no confidence that the Fed or fiscal policy can reverse the downward trend. To me, the market sees negative underlying conditions and inflation as much more problematic than the Fed does. In fact, the Fed thinks inflation will moderate in 2008. And I agree with my friend Mike Moffatt - I don't know why they think that.

Wednesday, January 23, 2008

It's never a good sign that, even with an unorthodox surprise 75 basis point drop in interest rate by the Fed, the Stock market continues to fall (Dow Jones - over 200 points since beginning of yesterday's trading). Investor confidence in Bernanke (or the Fed's ability to help) must be really low.

Wednesday, January 16, 2008

I think the answer to the title questions lies in the fact that we are experiencing a simultaneous decrease on both the supply and demand side. Hence, other than certain necessity items (like food), soaring gas prices have not had a trickle effect on other prices in the economy because while the gas prices can have an effect on our economy's output of goods, we are simultaneously experiencing a demand-side malaise led largely by negative perceptions due to: the Iraq war, media pundits proclaiming a huge economic crisis, a declining dollar, middle class real-wage stagnancy, and the bubble burst in the housing market, etc.... The demand side shift is tending to keep prices down just as high gas prices and falling supply is pushing prices up.

The result is that core inflation is not rising as one might expect from higher oil prices. All of that matters little. The point is that national output/expenditure is likely to grow at a snails pace (if you are an optimistic economist) or may even dip into negative growth (if you are, like me, less than optimistic). High prices or low prices, that's bad news. But there is one saving grace - and that is the stagnant prices give a little more breathing room to Bernanke and friends.

NPR has been reporting on a story regarding a new popular facebook applet / online game called Scrabulous. Going to scrabulous.com, the game is remarkably similar to Scrabble (which is owned by Hasbro, who maintain intellectual property rights over the game). Of course, Hasbro isn't too happy that millions of facebook subscribers are adding Scrabulous to their profiles and playing it online (without Hasbro's permission of course since Scrabulous is not owned by Hasbro). Hasbro has said it will try to resolve the issue privately (ie try to kick Scrabulous to the curb) but if talks are unsuccesful it will sue arguing that its intellectual property has been violated.

This to me is a great example of an ever increasing body of evidence suggesting that the whole notion of "intellectual property" needs serious legal and economic reexaminging. Luckily many economists are focusing more on this field and many (See Boldrin and Levine, for example). I myself see benefits and costs (tradeoffs) that argue for and against intel. property rights.

But this case of Scrabble is a bit ridiculous insn't it? There's this harmless online game that, to my knowlege was created by 2 twenty-something guys who were probably bored and just wanted to do something fun. They did, and they distributed it online and now people can play this for free online. Two points: First, I'm wondering if the very "online" nature differentiates Scrabulous enough from Scrabble to make it legally a "different" game. Second, I say it's harmless because I really doubt this online game eats into Hasbro profits - precisely because an online game is different than that an offline one. I can't easily play an online game at the kitchen table with a large group of my family and friends. The "feeling" isn't the same, much as it's not the same reading an online book compared to laying down with a glass of wine by the fireplace and enjoying a nice paperback.

I understand the point that intellectual creativity needs to be incentivized and maintaining intellectual property may be important to that end (though the degree can be debated). But Scrabble has been around for decades and really it's just a multiplayer crossword puzzle, and those have been around for centuries. I think at some point these types of intellectual property and copyright extention monopolies harm social welfare in the long run. Beyond that though, I would think Scrabulous serves to introduce the traditional Scrabble game to a younger newer market - which I think Hasbro would not want to frown upon.

Friday, January 11, 2008

John McCain recently stated something to the effect that manufacturing jobs lost in Michigan may not be coming back. In other words, he can help, as President with the job crisis in the midwest but he correctly points out that our economy is undergoing a shift in terms of employment - a shift from manufacturing to service sector.

Of course we all remember Mankiw's famous line as advisor to President Bush about how outsourcing can actually be a good thing economically (the subtext being that a shift is occuring and that such shifts are natural economic long-run developments).

Wednesday, January 2, 2008

I broke down and bought the Nintendo Wii on Ebay this weekend. Wii's are impossible to find in stores. The demand for the addictive physical gaming system is through the roof, yet Nintendo insists on keeping the retail price at the ridiculously low $250. Hence, there has been a massive shortage of Wii's for over a year now.

Obviously, if you are one of the lucky ones able to get your hands on the elusive Wii, then that price point is to your benefit. If you are like me however, and have recently become addicted to Guitar Hero 80's edition (a predecessor to Wii's Guitar Hero III), as well as Wii's funny and quirky "Cooking with Mama" game, then you can understand why I was willing to pay $100 over retail on Ebay to get my fix.

That may seem ridiculous, irrational even (calling someone with an economics background "irrational" is a little like calling Stephen Hawkings "stupid" - it's perhaps the most offensive thing one can say to a trained econ person). Nevertheless, I need my guitar hero and I need to cook with mama, and I need to play golf in my living room. So BACK OFF ;).

Garth Brazelton

About Me

I work for the Indiana Economic Development Corporation as the Director of Operations and Business Systems, and I teach macroeconomics at Indiana University (Indianapolis). Previously, I was an Economist at the US DOT in Cambridge, MA. This blog does not represent the opinions of any of these organizations.